MUMBAI, APRIL 15, 2013: ON 26.11.1999, the Customs Preventive Wing apprehended one person who introduced himself as Mohammed Hashim Abdulla . On an enquiry, he accepted that he was carrying foreign currency in his person which was the sale proceeds of the smuggled goods.

A detailed search of his person in the presence of an independent witnesses resulted in recovery of US$ 10,100/-. As the appellant could not produce any licit documents for acquisition and possession of the foreign currency recovered from him, the said foreign currency was seized under Panchanama under the provisions of Customs Act, 1962 read with FERA, 1973 on the reasonable belief that the said foreign currency was smuggled in the country and was, therefore, liable for confiscation under the said Acts.

The proceedings culminated in absolute confiscation of the foreign currency and an imposition of penalty of Rs. 50,000/- on Shri Hakim Esmail Penwala .

Against this order, the appellant is before the CESTAT.

After narrating the business practice involved, the appellant submitted that the standing practice of receipt of foreign currency transactions by cash is well recognized by law as per the guidelines issued by Board's Circular No. 17/95-Cus dated 1.3.1995; that in the case on hand, the amount is attributable towards export order placed by two foreign nationals and given to the appellant by these foreign nationals duly supported by an affidavit as well as export order; that even if there is any violation of Section 8(1) of FERA, the same violation is at the hands of such foreign pax and not at the hands of the appellant and hence the currency would not be liable for confiscation; that as per the export order the consignment was exported vide invoice dated 5.12.2000 though the amount pertaining to transaction is in the possession of the department.

It is also submitted that the allegation that the foreign currency was attributable to smuggled goods and liable for confiscation is not correct as none of the requisites of Section 121 of the Customs Act have been fulfilled inasmuch as no sale of smuggled goods has been established and that the statement recorded on 26.11.1999 was recorded under duress and that the same has been retracted on 08.12.1999.

The Revenue representative submitted that in the statement recorded the appellant had admitted the charges leveled and hence the same is binding. In support he inter alia relied upon the decisions in case of Surjeet Singh Chhabra vs Union of India - 2002-TIOL-158-SC-CUS, Devi Dass Garg vs CCE Delhi- I - 2010-TIOL-1502-CESTAT-DEL & K.I. Pavunny vs. CCE - 2002-TIOL-739-SC-CUS-LB.

The Bench observed –

"6. In this case, the appellant was apprehended and on physical verification it was found that the appellant is having US $ 10,100/- in his possession. At the time of apprehension it was accepted by the appellant that the foreign currency is sale proceeds of the smuggled goods. The said statement was retracted by the appellant within 15 days through documentary evidence showing that the said foreign currency recovered from the possession is an advance of an export order made by two foreign nationals. The same was also supported by the purchase order, export order and affidavits along with the copies of the passport of the foreign nationals. This is also an admitted fact on records that the export took place and as per the trade practice vide Circular No. 17/95-Cus dated 1.3.1995, the Board has clarified that in the interest of the expeditious passenger clearance and the current liberalization scenario such exports through passengers baggage may be allowed so long as proper proof of the goods having been procured against payment in foreign exchange is provided by the passengers. In the case of Pukhraj Nihalchand Jain (supra) wherein the foreign currency seized from the appellant's possession, the burden to prove that the foreign currency has been obtained through illicit means, lies on the Revenue. As the Revenue failed to discharge the same, confiscation under Section 111(d) of the Customs Act, is not sustainable. In this case, although the statement was recorded under Section 108 of the Customs Act but the same was retracted through documentary evidence and nothing contrary have been proved by the Revenue that the possession of the foreign currency has been obtained through illicit means, the charge that the foreign currency in the possession of the appellant is the sale proceeds of the smuggled goods is not sustainable…"

Holding that the appellant has been able to prove that the foreign currency is obtained by them against an export order and the goods have exported against that export order, confiscation of the foreign currency under Section 111(d) of the Customs Act was held as not sustainable.

The order of the Commissioner was set aside and the appeal was allowed with consequential relief.

(See 2013-TIOL-605-CESTAT-MUM)